The importance of sustainability in machining processes is increasing due to limited resources and growing environmental considerations. Hastelloy-X is difficult-to-cut material, especially in a dry environment. The present work was carried out by using alumina–zirconia (Al2O3–ZrO2) ceramic inserts in a dry machining environment. Machining experiments were performed with varying cutting speeds (100, 125, 150, 174, and 200 m/min.), feed rates (0.05, 0.1, 0.15, 0.2, and 0.25 mm/rev), and depth of cut (0.1, 0.2, 0.3, 0.4, and 0.5 mm). A total of 25 experiments were performed using Taguchi’s L25 orthogonal array. Consequently, the tool face wear (TFW), tool wear loss (TWL), surface roughness, and material removal rate were analysed for a comprehensive understanding of the machinability and tool wear. At low cutting speeds and high depths of cut, high deterioration and catastrophic fracture were observed, whilst by lowering the cutting speed and depth of cut the built-up edge (BUE) formed. From the workpiece material at elevated temperatures, diffused iron (Fe) and chromium (Cr) react with oxygen (O) to form mild oxides that initiate the BUE. Tool face wear and surface roughness both are most influenced by cutting speed, followed by depth of cut and feed rate. Tool face wear has direct correlation to the surface roughness. The sustainability assessment considers multiple criteria, including energy consumption, coolant cost, waste generation, operator health, surface roughness, workpiece cleaning, coolant recycling and disposal, tool cost, and noise level. Each criterion is rated on a scale of 1 to 10 to quantify its impact and significance in the sustainability assessment. Finally, the Product Sustainability Index (PSI) value of 7 indicates that the ceramic tool offers significant benefits in productivity, environmental sustainability, and workpiece quality for machining Hastelloy-X. The lower energy consumption, noise levels, and tool wear rate make it an attractive option. However, the moderate tool cost rating suggests potential for further cost reductions to enhance the economic sustainability of the machining process.